Crawford & Co (CRD.A) 2009 Q1 法說會逐字稿

Good afternoon. I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford & Company first quarter 2009 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawfordandcompany.com under the Investor Relations section. After the speakers remarks there will be a question and answer period. (Operator Instructions).

As a reminder, ladies and gentlemen, this conference is being recorded today, Monday, May 4, 2009. Some of the matters to be discussed in this conference call and in the supplementary financial presentations may include forward-looking statements that involve risks and uncertainties including statements regarding liabilities associated with our frozen defined benefit pension plan and our ability to pay dividends in the future. The Company's actual results achieved in the future quarters could differ materially from results that may be implied by such forward-looking statements. The Company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call to reflect events or circumstances occurring after the date of the call or to reflect the occurrence of unanticipated events. For a complete discussion regarding factors which could affect the Company's financial performance, please refer to the Company's Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission, particularly the information under the headings business, risk factors, legal proceedings, and managements discussion and analysis of financial conditions and results of operation. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required a reconciliation is provided for those measures to the most directly comparable GAAP measures which is available on our website at www.crawfordandcompany.com/quarterly releases.

I would now like to introduce Mr. Jeffrey Bowman, President and Chief Executive Officer of Crawford & Company. Mr. Bowman, you may begin your conference.

Thank you. Good afternoon. A very warm welcome to our investors, clients and employees this afternoon for a discussion of our 2009 first quarter results together with our current earnings guidance for 2009. I am Jeffrey Bowman, President and CEO of Crawford & Company. Joining me from the global executive management team this afternoon are Bruce Swain our CFO and Allen Nelson our General Counsel and Chief Administrative Officer.

Today I will be talking briefly about the insurance sector and global markets followed by the financial highlights of the first quarter 2009. Bruce will review the first quarter financial results in more detail, and I will wrap up with a review of the segment operating performance and a discussion on the guidance and economic headwinds we face in 2009. There is no doubt that the global economic outlook has continued to deteriorate in the first quarter. In a recent report, profits in the American Property and Casualty sector dropped 96% last year. This produces challenges for the claims industry. I'd like to mention some common trends we see emerging in our marketplace. One; higher insurance carrier expectations regarding claims providers. Two; consolidation of outside service providers. Turning to the first item, we see clients making decisions on their claims handling providers based on expectations for increased speed and claims handling and a focus on customer service. At Crawford we are able to provide claim solutions to insurance providers and their policy holders that involve centralized claim solutions. There are three ways to enter into business with Crawford or develop a strategic engagement between us and our clients.

Firstly, claims services which are transactional claims adjusting and administration. Secondly, business process outsourcing, which is outsourcing all or part of the claims function. And thirdly, consulting which is expertise for hire. Consolidation among our clients is an increasing trend today across all our businesses as the insurance industry is coming under increased pressure from lower investment income and rising loss costs. The outsourcing of claims allows for a better cost of delivery by turning fixed costs of carriers in house claims department into variable costs while reducing the clients need to invest in claims technology. That is a positive trend for Crawford.

Lastly we are seeing our clients seek more alternative options for claims handling. Our clients globally are looking for business process improvement and automation. Such as desktop adjusting and using managed repair facility. We are well positioned to handle the increase we see in these low severity claims. Improving the ease of doing business with claim solution companies is paramount to our business proposition by our clients. In the third party administration market which has become very aggressive in pricing for new business and renewals, risk managers have become increasingly cost conscious due to pressure on their business and are looking for ways to reduce costs and improve efficiencies. Additionally, in our International Operations segment, we are seeing a demand for increased operational efficiencies in a more regulated environment. And globally there is more discussion on service differentiation resulting from handling simple, low-value through complex high-value claims. This is where our recent investments in technology are playing a large part in our success.

Consolidated revenues in 2009 we believe will reflect declines driven entirely by currency shifts and the softening of the workers compensation market. As a result, we have implemented further cost saving measures throughout our business. At this point I expect that Crawford will see operational progress this year as growth continues both in the US Property and Casualty business segment and in the International Operations when measured in constant dollars. As with many companies, and as reported previously, the increase in pension costs will affect our operating margins and performance throughout the year. Nonetheless, insurance remains a part of the DNA of global business. It continues to be a vital industry, even in difficult economic times. And we remain optimistic about the growth opportunities for our operations.

So let me review some of the challenges and progress made in the quarter. Let me start by stating that while the current quarter is lower than the first quarter 2008, results were ahead of our initial expectations. The 2009 quarter shows a revenue decline of 7.6%, but on a constant dollar basis, would have shown an increase of 1.6% over 2008. Our US Property and Casualty division had an increase in revenue of 11.2%, and a case increase of 6.6%, which was a good performance. Our International Operations segment grew 7% on a constant dollar basis, with improvements in Canada, Europe, and Asia Pacific. The strong US dollar negatively affected International Operations revenue by 23.4 million in the 2009 first quarter.

The economic factors mentioned earlier are a challenge for Broadspire. Thus far we have dealt with the major impact on unemployment from the economic storm that is upon us. Our client retention rate for the quarter was nearly 100% with recent customer announcements and other news on downsizing, we should expect that there will be some contraction of the existing business in workers compensation claims should unemployment increase as we go through this year. Let me walk you through the changes in our consolidated revenue net income and earnings per share. As you can see, when you back out the foreign currency impact in 2009, our revenues grew organically by $4 million. Our net income declined 12% before the 2009 effects of pension, foreign exchange and restructuring.

Earnings per share of $0.06 for the quarter reflects increased pension of $0.05, currency impact of $0.03, and a restructuring cost of $0.02. When looking at the quarter, and seeing the turmoil in the insurance markets, we believe it was an encouraging performance in a difficult environment. We stated last year that 2008 was not just about earnings. It was also about delivering on a strategy to improve our balance sheet and cash flow through working capital management and debt reduction, with a significant emphasis on improving days sales outstanding. This year is no different.

We are passionately committed to winning new accounts and importantly retaining those accounts we have through closer customer relationships. However, we have to manage in a different climate. At Crawford, we continue to refine our services to meet the changing needs of our clients. Insurance, after all, is a promise to pay when the need arises. The true value of any insurance arrangement emerges only when a claim occurs. Our expertise is then vital and we consider this to be the most important of our services to clients, what we call working together, the Crawford difference.

After Bruce provides a financial review of the segments results, I will discuss our operational business units and updated guidance for 2009. That concludes my initial remarks. Over to you, Bruce.

Thank you, Jeff. Company wide revenues before reimbursements decreased by nearly 8% in the 2009 first quarter to $236.1 million from $255.5 million in the prior years first quarter. This decrease is primarily attributable to a negative foreign exchange rate impact in our International Operations segment and a weakness in revenues generated in our Legal Settlement Administration and Broadspire segments. These factors offset double digit organic growth from our US Property and Casualty segment in the 2009 first quarter and 7% revenue growth when measured on a local currency basis in our International Operations segment.

At January 1, 2009, the Company adopted the provisions of FASB Statement No. 160, noncontrolling interest and consolidated financial statements. This segment changed the way in which the Company reports noncontrolling interest in the income statement, balance sheet and cash flow statement. This change will have no net impact on the Company's 2009 results of operations, financial position, or cash flows. Our net income attributable to Crawford & Company totaled $3.1 million as compared to 9.1 million we reported in last year's first quarter. We recognized fully diluted earnings per share of $0.06 in the current quarter as compared to earnings per share of $0.18 in last year's first quarter. First quarter 2009 earnings per share were reduced by $0.02 related to restructuring costs and certain of our International Operations relating to the completion of the legal entity realignment we undertook in last year's fourth quarter.

The Company selling, general and administrative expenses, or SG&A, totaled $51.5 million, or 21.8% of revenues in the 2009 first quarter. Increasing 1 million from $50.5 million, or 19.8% of revenues in the prior year quarter. This increase in costs is due to a $1.3 million recovery of a previously written off account during the 2008 first quarter. During last year's fourth quarter, and continuing into the 2009 first quarter, the US dollar strengthened dramatically against most of the major foreign currencies in which we operate globally. Reversing the weak dollar trend we had been experiencing and benefiting from over the past few years. International Operations revenues grew 7% in the 2009 first quarter on a local currency basis. But after reflecting the negative impact of exchange rate fluctuations, International revenues declined by 14.8% in US dollars to $90.9 million.

Excluding the negative effect of exchange rate fluctuations our revenue growth in local currencies primarily reflects increased case referrals and our Canadian operating region resulting from new business wins during the past two years, growth in our European region, and the positive impact of claims generated in our Asia Pacific region from recent CAT activity. International operating earnings declined to $7.5 million in the current quarter, down 16.9% from last year's first quarter operating earnings of $9 million. This reflects a slight decrease in the operating margin from 8.4% in the 2008 first quarter to 8.2% in the 2009 quarter. Revenues from the US Property and Casualty segment totaled $55.1 million in the 2009 first quarter, growing 11.2% from the 49.5 million reported in last year's first quarter.

Revenues generated by our catastrophe adjustors totaled approximately $4.9 million in the 2009 first quarter, increasing over the $1.9 million produced in the prior year period. Operating earnings in our US Property and Casualty segment totaled $6.2 million, or an operating margin of 11.2% of revenues in 2009 first quarter. This is compared to operating earnings of $5.9 million, or 12% of revenues in the prior year quarter. This operating earnings improvement reflects the benefits of increased catastrophe related claims. Within this segment the prior year results include a $400,000 recovery of a previously written off account. Revenues from our Broadspire segment decreased to $74.6 million in the 2009 first quarter, down from 80.3 million in the prior year quarter.

Overall claim volumes in this segment were down during the 2009 first quarter reflecting sharply lower industry-wide workers compensation claim referrals as a result of the weak US employment levels. Broadspire's operating loss in the 2009 first quarter was $2 million, or negative 2.6% of revenues decreasing from operating earnings of $1.7 million, or 2.2% of revenues in the 2008 first quarter. Legal Settlement Administration revenues comprised of class action and bankruptcy claims administration services declined 18% in the 2009 first quarter to $15.6 million. Operating earnings totaled $1.5 million in the 2009 first quarter, or 9.8% of revenues as compared to 2.5 million, or 13.2% of revenues in the prior year period. Legal Settlement Administration continues to have a backlog of projects awarded, totaling approximately $39 million at March 31, 2009 as compared to 50.5 million at March 31, 2008.

Our cash and cash equivalent position at March 31, 2009 totaled $42.5 million as compared to $73.1 million at December 31, 2008 and 42.8 million at March 31, 2008. Our unbilled and billed receivables have declined by a net of $13.6 million in US dollars during 2009, and our total debt has also declined in 2009 by a net of $4.2 million. Cash used in operations totaled $12 million for the 2009 first quarter compared to $4.1 million used in the prior year period. This $7.9 million increase was primarily due to lower net income and increased pension contributions in the current quarter. The Company's cash requirements typically peak during the first quarter and decline over the balance of the year. Our free cash flow stood at a negative $18.1 million for the 2009 first quarter, declining from a negative 11.2 million in the 2008 first quarter, reflecting the seasonal nature of our cash flows.

Jeff, this wraps up my comments.

Thanks, Bruce. Let me now add some comments and thoughts about business progress, and our outlook for each of our business units starting with the International Operations.

We saw strong revenue growth of 7% before currency impacts, resulting from contract wins that are predominantly Property and Casualty programs and our Canadian and UK operations. Despite the adverse economic conditions, we were able to maintain an operating margin of 8.2% against 8.4% in last year's first quarter. When we look at claims referred and compared 2009 to 2008, we see a small decrease in International claims of about 2.8% in the first quarter. This decrease was expected as it relates primarily to 2008 UK and Australian CAT claims. It is a positive sign for these operations that despite the claims trend, revenue and operating earnings continue to grow on a current - - on a local currency basis.

For the first quarter, International Operations represented 39% of the Company's total revenue, compared to 42% in the previous year. It is also worth noting again, that the foreign exchange impact on the first quarter 2009 revenue against 2008's first quarter was negative 21.9%, or $23.4 million. Now reviewing our US Property and Casualty segment. Even in a challenging overall economic environment, we improved the US Property and Casualties revenue growth by 11.2%, and by tightly managing costs provided an operating margin of 11.2%. The US Property and Casualty Operation has performed well on a 6.6% increase in total claims in quarter one. One trend we are seeing is a slowing down in the number of casualty claims in the US Transportation sector.

As a result of the investment we incurred in the previous year, in employees, training and quality, we are delivering a market-leading product. This is a significant strategy linked with our technology implementation of CMS-2. We are benefiting financially and operationally from increased process efficiency and have positioned the US Property and Casualty business unit to take a bigger share of the claims market as our clients consolidate. As mentioned earlier, we are beginning to see significant outsourcing opportunities from clients in the volume claims business as we grow (inaudible) connection, strategic warranty services and Crawford central. In quarter four last year, we focused on executing the implementation of a major transformation of the US Property and Casualty business model.

It's three main components were announced in early December and comprised of one; a substantial restructuring of field operations. Two; the introduction of a new command center in Atlanta that provided effective central oversight. And three; the development of a business process outsourcing model which will enable the delivery of a more comprehensive end-to-end claims processing for insurance carrier clients. We have now fully implemented one and two and will launch the business process outsourcing model in the current quarter. We believe these are exciting events for our clients and Crawford & Company in the US Property and Casualty segment. There were in the 2009 first quarter, an increased number of CAT events over the prior year. And consequently, we saw an increase in US Property and Casualty catastrophe claims revenue to $2.4 million for the quarter as compared to $1.9 million in 2008. The CAT events produced almost 4,500 claims in the 2009 period, compared to the first quarter of 2008 catastrophe claims of 2,100. In 2008, improvements in technology and processing capabilities enabled the US CAT services unit to complete the processing of CAT related claims in a more efficient manner. And we continue to develop those operational processes in 2009.

Now moving on to our Broadspire segment. We experienced a 19.8% decline in workers compensation claims in the first quarter versus the 2008 period. Which is consistent with the frequency decline of the whole workers compensation market. However, compared to the fourth quarter of 2008 claims volume, we have seen a slight increase of 2% in overall Broadspire claims in the first quarter of 2009. The fundamental decline has been a decade-long trend and has caused a lot of revenue from our existing customer base without the loss of the customer from our book of business. The reduction reflects the increase in current unemployment levels, and we may also be seeing a drop in reported claims by those employees remaining fearing that reporting a claim may make them vulnerable to staff reduction. Broadspire's revenue decreased 7.1% from the comparable quarter last year, and produced an operating loss of $2 million in the quarter. The loss in the first quarter includes increased expense relating to severance which is expected to lower operating costs going forward.

We remain confident in the business model for Broadspire. As we continue to manage our expenses closely and make our stopping model responsive to the current intakes of new claims. We have implemented an inventory management program to address the expanding inventory of open claims. Broadspire added additional focus and resources to their thousand marketing team to better sale services in the claims and medical management marketplace and developing innovative customer solutions. We have also started 2009 strong with TPA claims services and stand-alone managed care client wins. In fact, the value of the accounts won in 2009, to date exceed the total for all of 2008, and we see improvement in the year ahead. We currently have over 60 prospects in the third party administration pipeline. Broadspire is in a transitional phase within its core claims business, and our retention rates on existing business remain very high at nearly 100% for the first quarter.

Now our fourth segment, Legal Settlement Administration. The Garden Citigroup's first quarter revenue still continues to be affected by the timing of case flow, and has decreased 18% from the 2008 first quarter. The economic conditions have had a significant impact on GCG as companies are reluctant to settle class action cases. In particular, in the security class action marketplace, we are seeing a slowdown in the pace of settlements. While there has been a pick up in the number of filings, it is probably going to take 12 to 24 months for us to see that increase have an impact on Garden Citigroup. Overall, we are getting more engagements from more clients. We have been retained in 72 assignments versus 41 at this time last year. What this means is that we are getting more penetration within the legal community but the cases are smaller than we have been handling previously. As we are doing many smaller cases, our operating leverage is not the same as when we handle fewer, larger cases.

The economic downturn has had a positive impact on our bankruptcy group. We did succeed in growing bankruptcy business and have now moved to third place in this market segment. This year, we have begun with an increase in this segment, as we have been retained on 19 cases through the end of the 2009 first quarter. That's compared to 35 for the whole of last year. We expect to exceed last year's bankruptcy case count as we benefit from an increase in volume, that isn't being absorbed by our our competitors. Now 2009 first quarter operating earnings margin decreased to 9.8%, from 13.2% in 2008. And our backlog at the end of March was 39 million, down from 51 million in the 2008 first quarter.

Now looking at the guidance for fiscal 2009, we are reafirming our previously issued guidance for 2009 as follows: consolidated revenue before reimbursements between $960 million and $980 million, consolidated operating earnings between 50.5 million and 55.8 million. After reflecting stock-based compensation expense, net corporate interest expense, intangible asset amortization expense, special charges and credit, and income tax, net income attributable to Crawford & Company on a GAAP basis of between 22 million and 25 million, or $0.41 to $0.47 per share. I would point out that our overlook for 2009 includes 15 million of catastrophic claims revenue in the USA. This is lower than actual 2008 by $9 million.

Now let me finish my comments by stating that we will continue to build on the operational improvements as we move through 2009. Our priorities remain twofold. One; a disciplined approach to expense management working capital to help navigate these difficult economic times. And two; focusing on the improving operational efficiency and delivering results to our clients. We look forward to 2009 as we continue to grow and build a strong foundation for the corporation and capitalize on the opportunities presented. Thank you for your time and we look forward to your questions. Operator, would you please explain the process for asking questions.

(Operator Instructions). We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mark Hughes with Suntrust.

Well, thank you very much. Good afternoon.

Hi, Mark.

On the Broadspire business, with the claims count declining, has there been any offsetting increase in severity, any uptick in your case management business?

Yes, we have seen an increase in our case management business in the first quarter. Which is offsetting obviously some of the workers compensation claims decrease that we're experiencing.

Is that kind of a one for one if we just look at the decline in claims, the difference between that and the decline in revenue. Would that be a good short-hand for severity.

Yes. We are looking at it for the quarter, about a 20% decrease in workers comp claims and just a little bit slightly higher for the casualty claims.

Okay. How about the, you talked about a little more price competition in Broadspire. Does that, is that more than what you are experiencing at the end of last year? And could you give us a general sense of what the renewals, what your pricing trend has been like?

Yes. Pricing is always an issue. That doesn't really change whether there's a recession or nonrecession. What we are doing, we are doing a lot of work around developing standard models to go from [license plane] to budget priced annual pricing. Our clients like that approach. We are trying to obviously reduce our exposure on lack of claim model. And that again is something that is paying dividends. We are looking also to lock clients in on a multi-year deals to insure consistency and uniformity of revenue over the coming years. And that again is something we're in deep negotiations with our clients at this moment.

And then do you have any numbers for International CAT contributions. You do give us those numbers for the US, I'm not sure if you have those for the International as well?

That's not something we break out within our division. It's a - - the claims have came in were the residue that came over from the 2007 flooding in the UK and the hits that Australia had within 2008, I think was in Victoria. And this year we have seen a number of events that have been taking place. But they, we tend to treat those as residential and property claims although they are classified as a CAT.

Thank you.

(Operator Instructions). Your next question comes from the line of Adam Klauber with Fox-Pitt Kelton.

Good afternoon, thanks.

Hi, Adam.

Couple of questions. Could you talk about organic growth in both the US and International, starting with the US? Aside from having higher weather claims, you still had nice organic. Could you give us more color around where that that was coming from.

Yes, certainly. We put in place a number of programs and operational which have been taken back by operational efficiencies that we have put into our overall clients approach. We are seeing expansion in our contracted connection business which really result from a number of programs that we have recently concluded. We've also been winning a number of contracted programs - - with local insurers around really all areas. And we're still seeing some of the larger claim programs that we have producing a number of results really in the Property division.

It is really been a lot of technology improvements which have been benefiting our clients. Where due to the current economic conditions they're looking for speed of service, they're looking for quick information flows, they're looking for us to be able to engage with them on a efficient and process efficient basis. So that's really where we're seeing it in the Property and Casualty arena. And there has been as you are aware, a number of small catastrophe incidents that I think were up to CAT 70 at this particular moment. We have been getting volume in from those because we have been able to deploy our catastrophe division staff and then implement that with some of the technology changes we have put in place.

On the risk take, I think the second part of your question was risk take. Oh, International. Sorry. International. On the International, we've made a very large account win the year before which was the TD, Toronto Dominion. That has ramped up now to a full-year basis. There has been a lot of weather events in Canada over the end of last year and the beginning of this year which have enabled us to increase our, our operational flow on that basis. We are seeing also improvements in our European operations and also with the catastrophes that have happened in the Australian region. We have seen some, the higher peaks of business coming in there as well.

Okay. Do you have visibility aside from the backlog which is helpful. Do you have new contract wins coming in in the next quarter both in US and international?

Not quite sure I understand the question, Adam. On the backlog figure that we report is for our Legal Settlement Administration.

Right, right.

There's - -

Really looking for more of a pipeline of business flow in the US and international for the next quarter or two.

Yes, I mean, we have relationships in the US and internationally with nearly every major insurance company. So we handle claims for everyone. To the extent that we have dedicated volumes within our contracts or soul source arrangement similar to the one that Jeff just mentioned, we have very good visibility into that. Otherwise, a lot of the services that we provide to both in the US and internationally,or particularly in the US, is coming from an overflow basis where we are handling claims that can't otherwise be handled by the insurers in-house claims adjusting staff.

And so we have less visibility into that aspect of our business, both in US Property and Casualty as well as, as well as internationally. But we have seen, as you mentioned earlier, in your first question, a nice increase in volume even when you back out the catastrophe business that we got in the first quarter of this year. So we are seeing either the insurers funnelling more claims our way which we think is a validation of the high quality of service that we provide as an organization, and the investment that we've had in, in training over the years to make sure we have a market leading product.

Okay. That's helpful. As far as claims frequencies, aside from workers comp which is obviously having a tough time. What is the trend in other claim frequencies?

What we are seeing in the US is an increased number of low severity claims. Really policy, we see policy holders submitting smaller value but larger volumes of claims. I think the economic situation, a dollar goes a lot further these days, and - - individuals are making more claims that have to be adjudicated. The other area we are seeing is speed in claims and handling is vital to the carriers success. We have to very much focus on the customer service around having a shorter time in which to process or handle the claim which is critical. And then we are seeing a trend of the consolidation of outside service providers with carriers focusing on fewer claims solutions companies which really helps with us in terms of gaining more of the market share.

Okay. That's helpful. In the International business, if you exclude the FX differential, do the margin increase or decrease in that, the operating margin increase or decrease in that segment.

It increased. It increased slightly.

Okay. Okay. And also you mentioned, I'm sorry, you said SG&A was up because of a $1.3 million something. Was that more in the first quarter of 2008 or first quarter of 2009.

It was in the first quarter of 2008 that we had a $1.3 million recovery. An account that we had written off. And that we had written off earlier in the 2000-2001 time frame. So we had a large credit that sat in the 2008 first quarter that is not present in the 2009 first quarter.

Okay. When we look at SG&A, sequentially, at 51.5 million, it is down a fair amount from the last say three quarters. Now is that due to the FX impact or is that due to your expense control.

It is going to be a combination of both. Certainly FX is going to impact it because of the sharp increase we saw in the US dollar relative to the other currencies that is we trade in. Those SG&A costs that are resident outside of the US are going to translate at a lower amount when they come back into dollars. But the second part of your question is very relevant and we have been focusing intently on our administrative cost structure along with all the other costs of our business. But we see a long-term key to our profitability being control of our SG&A costs. And making sure that the new dollars of revenues that we generate as a company are providing a strong incremental margin to us. And to the extent we can hold our SG&A costs and better leverage that going forward, the incremental margin potential is tremendous, and that's where we are focusing a lot of our efforts.

Okay. Thank you. One final question so we can be apples to apples. The EPS guidance you're giving for the end of the year, what number in the first quarter should we be using to get to that year end guidance? The EPS number.

Well we don't break the guidance down quarterly. So we had $0.06 in the first quarter of this year. And we believe that our results for the remaining three quarters will get us to a range of $0.41 to $0.47 for the full year.

Okay. That's very helpful.

Okay.

Thank you very much.

Thanks, Adam.

(Operator Instructions). Your next question comes from Mark Keith with SunTrust.

Thank you. Follow up on that, Bruce, that $0.06, you are saying that excludes the $0.02 in restructuring charge, right?

No. That's, that's net of the $0.02.

Right. But when you look at the $0.41 to $0.47 that is already taking into account the restructuring charge?

The $0.41 to $0.47 takes into account the restructuring charge.

Right. Though - - Okay. I think I got you. The - - you had mentioned perhaps an increase in high volume claims opportunity. Was that - - you said large relationships you're looking at, or is that just a general observation about the market?

This is Jeff. I'm - - that is specific clients that we are talking to on a global basis, we have a number of opportunities that we are tracking down very hard at this moment.

Is that something a little more immediate, a little more eminent than it had been in prior quarters or is this an ongoing effort.

It's just pure ongoing effort. We are taking the business process outsourcing model very hard to our clients. - - the conversion of the fixed cost for our client to a variable cost I think is very appealing model. And we are in discussions with a number of clients at this moment about that.

Okay. And then in Broadspire, what does it take to get back to profitability in that business? Are there actions you've already taken that will get us back fairly soon or do we need some additional volume there? How should we think about that.

I will take the first and then I will let Bruce jump in. Yes, we have taken some costs out of the operations. We continue to do that on a monthly basis. We have a model that we use to track the costs on each individual branch, each individual customer to show we are in line with our key performance indicators. Then we are looking very carefully at how we structure the operation. We do that on a monthly basis so that we don't get caught out on any trend. We have taken action on costs already which will help. If the workers compensation market does not get worse, and there's obviously no guarantee of that. We will see with new account wins that we have got coming on board, we will see some increases in our revenue. The big unknown factor for us is what happens to the workers comp market going toward. From our perspective, the first quarter was better than our expectations.

So when we think about 2Q, I think it will be still negative, break even, positive?

- - we are, we are not really going to break down our expectations into quarter-to-quarter segment-by-segment outlooks. Obviously, the increase in the US employment levels and the shrinking payrolls in the US have impacted this business more than any of our other businesses. This is probably the one that has shown the most sensitivity to the current economic downturn. You know a lot of the forecasting around this business is nothing - - in one part tied to the overall health of the US economy and whether we are still shedding jobs at the rate that we have been, or we see some leveling off and increase in jobs. The other part to this is our sales and marketing effort and our ability to take market share. And we have done a good job of bringing on new accounts this year and I think already for 2009, we have more accounts brought on.

Absolutely.

Than the entirety of 2008. So that is certainly, an encouraging sign.

And Mark, some of those accounts do kick in in the second quarter. And some of them will kick in in the third quarter. - - in these big accounts, you take on you've got some times two - three months implementation period before the revenue starts to flow in. - - that depends on whether it is a two year, three year or five year contract.

Right. You said that the number of new clients so far this year has exceeded what you signed up in 2008?

The revenue in - - on an annualized basis, the revenue that we have contracted for new clients in the first quarter of 2009 exceeds what we contracted in the whole of 2008.

I think you said you had you had 60 companies in the pipeline.

Yes, 59, about that figure, yes.

Do you have a comparable for say this time last year.

No, we don't. We have been, as part of our sales and marketing efforts we have put a lot more emphasis on accountability for the sales team. A lot more visibility into what is going on within the sales and marketing function, and insuring that we are being absolutely laser focused on what our sales executives are doing and following up and making sure that we understand when we don't win and when we do win. What the lessons are we get from that to insure we are able to continually readapt our model and make sure it meets the current climate of our clients requirements.

Thank you.

There are no further questions at this time. I would like to turn the call back over to Mr. Bowman for closing remarks.

Thank you, Molly. I would like to thank everyone for joining us this afternoon. And we look forward to talking with you all again at the next quarterly call and we wish you all a great rest of the week. Thanks very much.

Thank you for participating in today's Crawford & Company conference call. This call will be available for replay beginning at 6:00 pm today through 11:59 pm on May 11, 2009. The conference ID number for the replay is 96264399. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. Thank you. You may now disconnect.